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Demand for land, but not in Melbourne

Simon Johanson

DEMAND for residential land is set to rise around the country, but not in Melbourne or Adelaide, a respected forecaster says.

And despite tough conditions in the construction sector, work is expected to pick up next year, according to quantity surveyors.

Low interest rates and home shortages will underpin residential land sales in Sydney, Perth and south-east Queensland in coming years, according to BIS Shrapnel's Outlook for Residential Land, 2012 to 2017.

''The recent protracted weakness in the Sydney, Perth and Brisbane markets - and to a lesser extent the Gold Coast and Sunshine Coast - has created the conditions for an upturn,'' it says.

Lending for new homes and to first-time buyers was on the rise in the resource states Western Australia and Queensland.

''Although the data is being muddied a little in New South Wales by changes to first home buyer incentives, activity there also appears to be trending upwards,'' the report's author Angie Zigomanis said.

"The rise in loans for new dwellings, although modest so far, suggests that a recovery in demand for new houses and land is beginning to emerge in these states."

But any improvement may be some way off.

New home sales posted their third consecutive monthly decline in September, sinking by 3.7 per cent.

And despite the Reserve Bank's 150 basis points cut to official interest rates since November 2011, capital city home prices fell in October after four months of gains.

A survey of members of the Australian Institute of Quantity Surveyors supports a turnaround in construction next year.

"Although 2012 has proven to be a tough year, our members are forecasting an increase in escalation [of activity] of between 1 to 2 per cent for 2013,'' the institute's chief executive, Michael Manikas, said.

Resource sector activity is high in Queensland, WA and South Australia, while NSW is seeing the highest activity in the residential sector, Mr Manikas said.

BIS Shrapnel said any upturn in Sydney, Perth and south-east Queensland would be slow.

''Concerns about the outlook for the local and world economy, as well as employment prospects, are expected to make potential new house buyers hesitant.''